With tariffs dropping sharply at wind project auctions over last 2 years, the discoms are seeking renegotiation for lower rates.

BENGALURU: The Andhra Pradesh government has directed state-run power distribution companies to honour contracts signed with renewable energy developers, offering relief to generators at a time when several clean energy buyers are backing out of agreements and seeking lower tariffs.

Andhra Pradesh, one of the leading states in using renewable energy, has more than 7,000 MW of solar and wind projects and aims to take it to 18,000 MW by 2021-22.

In a letter to distribution companies (discoms) on March 15, the state’s principal secretary for energy said, “It has come to the notice of the MNRE (ministry of new and renewable energy) that some of the State Electricity Regulatory Commissions (SERCs) are not according consent for wind power projects which were commissioned before March 31, 2017, and for which power purchase agreements (PPAs) have already been signed. This creates an atmosphere of uncertainty in wind power sector and going back on contractual documents like PPAs may not be appropriate.”

ET has seen a copy of the letter.

Tariffs have dropped sharply at wind project auctions over the last two years, and discoms that had signed PPAs earlier are now seeking renegotiation to lock in lower rates.

Earlier this year, state utilities of Andhra Pradesh had moved a petition before the Andhra Pradesh Electricity Regulatory Commission (APERC) seeking consent for revisiting PPAs already signed with wind developers. They wanted to truncate the length of the already signed PPAs to five years from 25.

This issue was brought up too. “In this connection, the ministry advises that since the contractual agreements are sacrosanct, these should not be revisited unless there is a specific provision to do so in the agreement,” the letter said. Such a move would “shake the confidence of investors” and “adversely affect future bids,” it said.

The principal secretary advised discoms against attempting to reduce tariffs. “Ministry of power has stated that discoms under the states may kindly be advised not to resort to any such action against the terms of the contracted PPAs, especially in cases where such actions may cause adverse effect on the financial viability of power projects,” the letter said.